13th July 2022 > > Celsius Network.

tl;dr

Celsius Network executives could be in a whole heap of trouble.

Market Snap (at time of writing)

Market Wrap

A breach of $20k to the downside a couple of hours ago is not what we were looking for.

Occasional Series – Tour de France comes to St. Gervais Les Bains

Occasional Series – No CCC tomorrow

As I will be up a mountain.

Market Wrap

Miners are selling furiously to fund their operations, Mt. Gox coins will be released soon, and centralised platforms such as Celsius (see below) will be forced to liquidate their holdings.

This is not a pretty backdrop for crypto prices.

Curious Cryptos’ Commentary – Celsius Network

Celsius Network is a centralised crypto lending platform, that used to offer interest rates on stablecoins and other crypto assets at rates far higher than achievable in the TradFi world.

On the 1st and 2nd November 2021, the CCC – in a direct response to readers’ requests – took the time to investigate the potential benefits and pitfalls of lending stablecoins to platforms such as Celsius. My very firm conviction at the time was that the interest rates on offer came nowhere close to compensating for the risks involved.

Following the Terra fiasco, Celsius was one of those centralised platforms that found itself in deep trouble, much like Voyager (see CCC 8th July 2022).

On June 12th 2022, Celsius halted all withdrawals, deposits, and all other activities, leaving investors with no access to their funds, and with little to zero information about what might transpire.

I hate to say I told you so, but I did tell you so.

…

It seems that Celsius executives may soon be joining their Voyager counterparts in jail.

The U.S. state of Vermont’s Department of Financial Regulation (DFR) has stated that Celsius is “deeply insolvent”.

Their problems – like those at Voyager – stem from being over-leveraged during a broad market sell-off. It has been furiously paying down collateralised loans taken out on Decentralised Finance (DeFi) platforms such as Aave and Maker, freeing up the collateral which possibly at some stage might be used to repay a (small) portion of investors’ funds.

The DFR is deeply unimpressed with the financial activities of Celsius.

It claims that Celsius should have had a money transmitter license (nope, me neither) which on the face of it sounds like a serious offence.

Even more concerning for Celsius executives is that the DFR is claiming that Celsius engaged in “an unregistered securities offering” by providing crypto based interest accounts to retail investors.

Note that this is a totally different situation to the discussion currently underway as to which cryptos are commodities, and which are securities (spoiler alert: only BTC has had its designation as a commodity confirmed by the SEC so far, though one should expect others to follow shortly).

The one good thing that will come out of the recent crypto sell-off is that bad and potentially malicious actors like Celsius and Voyager get cleared out. One can only hope that future investors take heed of the risks and not just the potential rewards of inherently risky activities that involve leverage.